What it is
A recession is a period of general economic decline characterized by a significant contraction in economic activity. While there's no single universally agreed-upon definition, it is commonly identified by two consecutive quarters of negative growth in real Gross Domestic Product (GDP). Other indicators include rising unemployment rates, falling retail sales, and reduced industrial production. The National Bureau of Economic Research (NBER) in the U.S. officially declares recessions based on a broader range of economic data.
Central banks like the Federal Reserve aim to prevent or mitigate recessions through monetary policy tools such as adjusting the federal-funds-rate or implementing quantitative easing. During a recession, the Fed typically lowers interest rates to stimulate borrowing and investment. News of economic indicators like the jobs-report or consumer-price-index can signal an approaching recession, affecting investor sentiment and asset prices, including crypto, as investors often seek safety or reduce risk exposure.
Why it matters
Recessions lead to job losses and reduced consumer spending, impacting financial markets, including crypto, as investors adjust their risk appetite.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice